Taxing “unrealized capital gains” sounds like a catchy and obscure way to make wealthy people pay more in taxes, but it doesn’t work. A government that moves in this direction ignores the reality that people are not static. The process also involves “taxing wealth” which then becomes an arbitrary definition.
Unrealized capital gains are not income, they are simply increases in value.
If your home was worth $200,000 last year and $300,000 this year, you have an unrealized capital gain of $100k. A 15% tax bill on that value increase means the homeowner would have to pay $15,000 to the IRS.
Joe Biden is proposing to pay for his multi-trillion expansion in debt through this type of tax upon billionaires. Treasury Secretary Janet Yellen admitted this was part of their thinking to help pay for the Biden budget last Sunday. WATCH:
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Proposing a tax on money that does not exist is the peak of government. Sure the proposal applies only to billionaires who have massive gains in their stock portfolios, but billionaires are not esoteric titles. Billionaires are people who can, if needed, move their physical location and avoid any U.S. tax on their wealth.
This is the same reason why corporations move the location of their home offices to countries with lower tax rates, a process called corporate inversion.
If Elon Musk, Warren Buffet or any other multi-billionaire wanted to avoid U.S. taxes on their personal wealth they can (relatively easily) change their official residence to Mexico or any other nation where the value of their yet unrealized wealth would not be taxed. That individual inversion process is an easily predictable unintended consequence.
As noted in The Hill:
[…] Biden is suggesting that he will pay for the new spending by taxing people not on what they have earned but what they could earn from selling assets. Most people have assets that increase in value over time. Consider a family home. Over the course of many years, it can easily double in value, but you do not “realize” that money unless you sell it. Biden is suggesting that the government should start taxing you based on any increased value of the things you own, even though you have not actually made that money. It doesn’t matter that the home or stock or art could ultimately go down in value after you are taxed on the higher value. Indeed, if you tax some unrealized gains, you could in extreme cases force people to sell assets like a home to pay the tax on income that they did not make.
The administration has started where few would object: billionaires. (read more)
Additionally, another issue arises if the previously taxed asset goes down in value; an issue where the depreciation or loss becomes a negative tax liability. Meaning if you already paid taxes on an increase in value for an asset, and the following year that asset drops in value, the federal government would then owe you money to recompensate you for a realized loss. If you paid $15k on a $100k increase in the value of an asset, and the following year that asset drops in value by $100k, the $15k you paid would be deducted from the current year tax liability.
There are constitutional issues with the federal government taxing wealth or assets; however, the overarching premise behind every proposal is that all wealth belongs to the government. You hear this ideological perspective when people say “tax expenditures” or spending in the tax code. The idea is that your income is what the government permits you to keep, NOT what your labor has achieved.
The ideology behind taxing “unrealized capital gains” is the same ideology in the premise of “sharing the wealth.” It is an ideology that stems from a belief that your dollar earned comes at the cost of my dollar not achieved.
Beware the voices who would advocate for taxing unrealized gains in wealth as a source of government revenue. Once you start down the path of taxing wealth you set up a process where the U.S. government controls the limits of where that wealth is defined. It will never stop at billionaires….
There would most certainly be carve-outs for politicians and their cronies. This Socialist tax would hit the little man, no doubt. These people are inherently evil to the core.
Eh… this tax increase is going to have a threshold akin to the inheritance tax (which works essentially the same way.) It’s not gonna be your $500k investment account. It’s gonna be gains in excess of 3 million or 5 million or 10 million.
As a conservative, I have always despised the resentment that underlies progressive tax policy. Even though I’m not in the top bracket, I found it repugnant to the think I could reach into the pockets of someone wealthier than me to fund whatever program I want. Morally this is indistinguishable from robbery. But, as a class, the wealthy in America have become decadent and – at least socially – Left. Why in God’s name should I keep voting to protect people from their own stupidity? If the country club set wants a Joe Biden in the Whitehouse, let’ em have it. Tax Bill Gates. Tax Mark Zuckerberg. Tax Warren Buffet. It wouldn’t break my heart if George Soros fled the US.
Being a conservative means abiding by principles even when it costs you personally. Unfortunately, we’re at war and principles are saddling us with rules of engagement that act merely as an advantage to the enemy, who have none. The best thing that could happen to ANY American who expects the government to do everything is to raise the holy hell out of their taxes. Give them all the goverment they want, good and hard. And then watch the public’s appetite for government vanish, along with their tolerance of wasteful spending.
You said, “As a conservative, I have always despised the resentment that underlies progressive tax policy. Even though I’m not in the top bracket, I found it repugnant to the think I could reach into the pockets of someone wealthier than me to fund whatever program I want. Morally this is indistinguishable from robbery. But, as a class, the wealthy in America have become decadent and – at least socially – Left. Why in God’s name should I keep voting to protect people from their own stupidity?”
You are missing the premise of asset confiscation (since this is what it is); namely, that this opens the door to the government’s access to everybody’s wealth and assets. It is not a matter of the wealthy getting their comeuppance for their decadence and leftism; it is the matter that the government will not stop there, but will use our acquiescence to tax the wealthy as permission (or rather the collective lack of empathy toward people of means) to redefine the wealthy down to the middle class until, in fact, confiscation becomes the end game. I know this because it is exactly what happened in my native country (Cuba) after Castro and his communist regime took over.
The government confiscates my assets every time I get a property tax bill or receive a paycheck.
I understand what you’re saying, and that’s what I mean when I say I’m totally against this in principle. But the BIGGER problem we’re faced with is an American electorate that has bought into big government and big debt because the majority of Americans pay little to no federal income tax. More importantly, the nation is being destroyed socially by the educated, upper and upper middle class. Look who voted for Biden. You know what else I’d love to see confiscated? University endowments and non-profits. That’s hundreds of billions, if not trillions in wealth being used to fund the indoctrination of America so that people will vote to turn the US into Venezuela.
The barbarians are at the gate, and you’re trying to protect the people funding them. I’m ALL ABOUT letting the Left loot their own. Yes, eventually it will come down to me, but they’ll take a lot of their own with and and end up red-pilling a large segment of their governing coalition.
Um, you’re forgetting that if you support the “right people”, you can get away with anything, including murder (e.g.: Ted Kennedy). The Left will never take such action against their own. There will always be exemptions and carve outs to protect the Soros’s, Zuckerbergs, Omidyars, etc., who fund the left.
Spot on.
First they came for the wealthy socialite and I was not a wealthy socialite so I said nothing…
While I agree with you in principle but there is no chance that the “public’s appetite for government will vanish, along with their tolerance of wasteful spending” Milton Friedman essentially said the same thing, but he was proven wrong. Ask any Republican who can remember the refusal to raise the debt limit back when Clinton was president. That proved to be politically suicidal. In the Reagan administration David Stockman took a run at it but couldn’t sell it – even to Reagan. So, despite all the successes Reagan had, government spending continued to grow. Curiously, Paul Ryan came the closest to actually selling a balanced budget, but he ran afoul of hard-core conservatives among others. Government never recedes, it only grows and with each step of growth our freedoms are what recede. Venezuelans got all the government they wanted. Their appetite for government has probably atrophied if not vanished, but they can’t get rid of it. As for their tolerance of wasteful spending, their government has ensured there is almost nothing left to spend.
This is the same age old routine of all of mankind throughout all of history. If greed is not sufficiently handcuffed, it takes over. I want, I want, I want is all people desire in their hearts. It’s never enough.
They are trying to build the New Rome or as the Bible says, another Babylon.
And, by damn, they will at any cost.
“ [W]e’re at war and principles are saddling us with rules of engagement that act merely as an advantage to the enemy.”
These are my principles but if they become inconvenient, I have others.
Democrats want to tax money that doesn’t exist. We knew this would eventually happen.
Why Not..?
They spend money that does not exist..!
FJB
And eventually take all private property so it doesn’t exist.
I am really starting to understand why they want to disarm US…
When does this BS end?
It doesn’t unless or until we rise up against it in force.
Wow. Close your eyes and listen to this (nonsense) …..I’d easily think this was Fauci prattling on….
This is precisely the same method used by states (well mine anyway) to charge property taxes.
Until possibly now, at least, a home was the only investment where you paid taxes on perceived gains without selling the asset.
If you never moved again, you are taxed on an arbitrary “value” that government gets to assign!
It’s also double-taxation which is unconstitutional. If someone sells their home, they will be taxed on that as well no?
And what about the things decreasing in value? Will the IRS PAY for that? No… didn’t think so.
An elderly woman I know had always planned to make her final home a Masonic Home in Covina, CA. The move was to take place a few months ago. Zillow got in the way.
They valued her real estate property in NorCal, sight unseen, at well over $100k more than it was worth and the Masonic Home called her a liar and a cheat. She had 22 acres and a dilapadated homestead house which she and her husband built in the 70s-80s with little to no improvements since. She was selling it for the land only, with no appraisals.
After a week of back and forth with them, she told them to take a hike. I dare say that will not work with the IRS.
but it’s kosher to tax cattle’s wealth
cattle are conquered so all of their wealth belongs to the Sanhedrin in the first place because they own the cattle
I believe the scripture says that God owns the cattle on a thousand hills, not the Sanhedrin
between things like this and imputed rent, it’s just a way to destroy the benefit of property ownership. Not allowing people to evict during COVID lead the way. The message was, you can “own” a home, but we will control who lives in it, what you can do with it, how much you can charge (rent control) and then we will take any profits through taxes.
Yellen looks like some hideous sci-fi creature from the TV show X-Files that haunted porto-o-sans and literally sucked the $-hit outta it’s victim. Or the salt sucker from original Star Trek. your choice.
You’d think with all her money she could afford a makeover.
She is an ideal candidate to take The Head Transplant Challenge.
TIME TOO STOP THE TAKEOVER !!
“Proposing a tax on money that does not exist is the peak of government.”
Actually the government SPENDING money that does not exist is the peak of government. That is why we are $30T in debt.
They already tax some assets with unrealized gains, annually: Our homes.
This is really a stunt to eliminate the 401K, which are the only retirement benefit of the middle class. It is also the only wealth amassment of the middle class.
They are really out to destroy us and then replace us.
“This is really a stunt to eliminate the 401K.”
…without provoking armed resistance.
Seems to me the 1% income tax only applied to people with incomes over over 1000 ounces of gold or Double Eagles, now equivalent to over $1.75 m per year, despite suppression of gold demand.
What went wrong?
Congress reenabled Hamilton’s Central Bank that Jackson was successful in destroying.
The real goal is to deplete the capital gains of the middle class through a new tax.
Basically this would be the device for keeping all of the proles in line because if they get too uppity, the IRS will just haul them in and demand payment for taxes on unrealized gains on their house or car or a painting that they might have and then throw them in jail and freeze all of their assets until they cough up. Imagine trying to fight an accusation like that without any money to hire an attorney to litigate on your behalf. The IRS becomes a combination of the KGB, Stasi and the Venezuelan hit squads to crush dissent in this country.
They are already taxing the unborn.
Future generations are already on the hook for all this insane profiligate spending to achieve their Marxist dystopia.
Betcha they wouldn’t let you reduce your taxable income with unrealized capital losses.
Interesting to consider the “unrealized gains” on which people would have been taxed just before the housing bubble burst and they found themselves “upside down”. Would the government give back the money they were taxed?
And how, exactly, would you measure a billionaire? What assets would you measure? Property? Investments? Business ownership (Cargill is privately held, for example, as are many LLC businesses)? Mineral rights? And so on. You can be sure the measurement would not give anyone the benefit of doubt. And when they couldn’t get enough money to pay for their crazy spending would the threshold move down to (fill in the blank here). And then they came for you and me.
The problem is that “income” is an accounting concept. Under the original Constitution it is pretty clear that this “wealth” tax is a direct tax that would have to follow the rule of apportionment. That’s how the government funded wars in the old days. Direct taxes as levied primarily as property tax, including slave property. During the civil war, there were arguments that the direct tax was unfair as owners of joint-stock companies could not be assessed. Hence the desirability of a tax on incomes. But the supreme court ruled that you had to look to the source of income to determine if the tax was direct. That was avoided via Amendment XVI which states that tax on income from any source is not a direct tax and hence follows the rule of uniformity for duties, imposts, and excises. So the problem is defining “income” for purposes of Amendment XVI. You can call anything income. But even if the “wealth” tax passes as an income tax, you still have the problem of assessment. For example for tangible property, do you have to reduce your basis by any allowed depreciation? And for intangibles, what about things like “good will”?
One thing is sure, a wealth tax will make accountants rich. I would think there are any number of ways to structure ownership.
They know all the jabbed elderly will be dead in 2 years.
And once the billionaires flee the country to avoid the tax, guess who’ll get the bill…The millionaires and when they also flee, the middle class, who can’t afford to flee. But then, the middle class was always the real target.
Soon “the rich” will be defined as anyone with a job and house.
In English Composition class one day, Edna Fitzsimmons instructs her prize student to apply today’s vocabulary lesson.
“Ralphy, use ‘unrealized’ in a sentence,” and Ralphy dutifully responds.
“The ‘unrealized’ hopes and dreams of the frugal investor are to be banished forever.”
“[I]f you tax some unrealized gains, you could in extreme cases force people to sell assets like a home to pay the tax on income that they did not make.”
Didn’t some famous IRS tax lawyer once pontificate that, “Dispossession is nine tenths of the law.”?
how can you pay taxes on money you didn’t make?